Mumbai: The State Consumer Dispute Redressal Commission has reprimanded Marathon Developers for canceling the booking of office space by the complainant without his consent, even after the developer receiving the earnest money towards the same.
The commission found the developer guilty of adopting unfair trade practices and directed to accept the remaining 70% of the agreed value of the space and hand over its vacant and peaceful possession to the complainant.
Additionally, the commission has ordered the developer to pay Rs 2 lakhs as compensation for the complainant’s mental agony and Rs 50,000 towards litigation costs.
In its 16-page order, the commission while referring to the Supreme Court judgment regarding earnest money, has cited the following principles laid down by the apex Court: It reads that the Earnest money –
1. It must be given at the moment the contract is concluded.
2. It represents a guarantee that the contract will be fulfilled, or in other words, earnest money binds the contract.
3. It is part of the purchase price when the transaction is carried out.
4. It is forfeited when the transaction falls through due to the purchaser’s default or failure.
5. Unless stated otherwise in the contract terms, the seller is entitled to forfeit the earnest money if the buyer defaults.
The order further stated, “As discussed above, the allottee cannot terminate the contract on their own. In a letter dated March 24, 2008, the complainant mentioned paying 30% of the advance to the opposite parties. Hence, it is proved that the complainant paid 30% of the advance booking amount. Admittedly, the developer failed to execute the Agreement for Sale as required under Section 4 of the Maharashtra Ownership Flats Act (MOFA).”
The case dates back to March 2005 when Johnson Lobo, a resident of Mulund West, booked office space measuring 551 sq. ft. in the developers’ project “Marathon Max Phase-II,” located at the junction of Mulund-Goregaon Link Road and L.B.S. Marg, Mulund (West), for a total consideration of Rs 15,01,475/- along with a parking space. Against this amount, the complainant paid Rs 4,50,442.50, i.e., 30% of the agreed amount.
However, on March 21, 2005, the complainant received a letter from the developer stating that due to unavoidable circumstances, they were unable to continue the construction of Marathon Max Phase-II. Further, the developer unilaterally terminated the booking of the office unit without the complainant’s informed consent, which the complainant described it as “unconscionable action”, in the complaint copy.
Despite the complainant expressing willingness to wait until the project’s completion, the developer failed to respond to the complainant’s letter. Aggrieved by the developer’s behavior, the complainant approached the consumer commission and filed a complaint.
The developer in its reply argued that the complaint was not maintainable and should be dismissed with costs. It contended that the complainant, being a professional engineer, had booked the commercial unit for running his office to provide self-employment.
The developer further claimed that since the office premises were commercial and not residential, the matter did not fall under the Consumer Protection Act. Additionally, the developer stated that the complaint was time-barred and, therefore, not maintainable.
